If we do not want to go into the intricacies of the term, then we can define environment as everything that surrounds us. Whatever we see around us is confined to the living component of the human eco-system. With time, the concept has undergone modifications. Today, environment means a single system of the interacting living and non-living natural components of the earth.

But the earth is not the only planet of the solar family, which again belongs to our home Galaxy — the Milky Way. There are about 100 billion such galaxies floating in the vast universe, each containing about 100 billion stars!! In this universe, not a single event can be said to be isolated, and no object is independent of the rest.

Since everything is interrelated with every other thing, logic demands-that the entire universe is our environment. But, for practical reasons, environmental study deals only with the system of interaction between non-living and living components of the globe.

Business environment is the sum total of all external and internal factors that influence a business. You should keep in mind that external factors and internal factors can influence each other and work together to affect a business.

Understanding the environment within which the business has to operate is very important for running a business unit successfully at any place.

As stated earlier , the success of every business depends on adapting itself to the environment within which it functions. For example, when there is a change in the government polices,the business has to make the necessary changes to adapt itself to the new policies. Similarly ,a change in the technology may render the existing products obsolete, as we have seen that the introduction of computer has replaced the typewriters; the colour television has made the black and white television out of fashion.
Again a change in the fashion or customers’ taste may shift the demand in the market for a particular product, e.g., the demand for jeans reduced the sale of other traditional wear
. All these aspects are external factors that are beyond the control of the business. So the business units must have to adapt themselves to these changes in order to survive and succeed in business. Hence, it is very necessary to have a clear understanding of the concept of business environment and the nature of its various components.

– FEATURES OF BUSINESS ENVIRONMENT

On the basis of the above discussion the features of business environment can be
summarized as follows

(a) Business environment is the sum total of all factors external to the business firm and
that greatly influence their functioning.

(b) It covers factors and forces like customers, competitors, suppliers, government, and
the social, cultural, political, technological and legal conditions.

(c) The business environment is dynamic in nature, that means, it keeps on changing.

(d) The changes in business environment are unpredictable. It is very difficult to predict
the exact nature of future happenings and the changes in economic and social
environment. .

(e) Business Environment differs from place to place, region to region and country to
country.

Business establishes, grows or operates and dies in environment. It exchanges resources I environment. It collects inputs i.e. Man money, materials, machines etc. And provides output i.e. Goods and services in the environment. Environment means surrounding. Business environment defines as a force that affects on organizational performance. It includes internal an eternal factors. It provides opportunities and threats.

1.. Internal environment

It is defined as all the forces or conditions that are available within an environment that affects on organization and business. It is also known as controllable factors because business can control them. It includes

I. Employees

Business hires employees. It is the major internal factor. It works inside the business. It can be controlled by the business. Employees differ in skill, knowledge, morality, and attitude and so on. When managers and employees have difference in goals an beliefs then conflict may arise. The task of management is to divide the work and assign the work to the suitable employee and handle the conflict.

Ii. Shareholders:

Management deals with many shareholders. Shareholders have the right of ownership, power of management and voting right. The actual management of organization is carried out by elected representative of shareholders jointly known as boar of directors. Boards of directors have the responsibility of overseeing the management of organization. It plays the major role in formation of objectives, policies, strategies of the organization as well as their implementation.

Iii. Organization structure:

It is located inside the organization. The arrangement of various facilities, pattern of relationships among the various department, responsibility, authority and communication is the organization structure. It also included specialization and span of control.

Iv. Organization culture:

The sets of values that help the members to understand what organization stand for how it does work, what it considers, cultural values of business forces of business and so on. It helps in direction of activities.

2. External environment (PEST)

All the forces and condition that cannot be controlled by the business is called external environment. . It is also known as uncontrollable factors because business can’t control them. It is located outside the business. It affects on organizational performance.

It includes:

I. Economic environment.

It indicates the condition of economy in which business organization operates. It has continuous and great impact on business. It includes national income, production, inflation, savings, investment, price, government activities. Business person must have constant watch on this factor.

Ii. Political or legal environment

It is defined as rules and regulations determined by the government. Business must fulfill demand of government. There should be non violation of rules and regulation of government. Business should avoid unfair trade and should provide essential information to the government.

Iii. Social environment.

Business must have good environment where a business can be established neatly. Business also helps in employment opportunities generation. There should be socio cultural understanding and application of anti pollution measures.

Iv. Technological environment:

It defines about the methods available for converting resources into product or services. It transforms inputs into output. Inputs means material, capital, man, machine. It affects on business. It helps to change the level of job, skill, and product and so on. There can be innovation, development of scientific techniques which encouraged mass production and distribution.